View frequently asked questions (FAQ) for BPCA Investor Relations.

General Questions

How do I purchase BPCA Bonds in a negotiated primary market sale?

Step 1 - Learn about the Bonds

Read the Preliminary Official Statement (POS) available from this web site or from the participating brokers to learn more about the bonds, including their security, maturity dates, credit ratings, the types of projects they finance and other information that you may find important to help you make an informed investment decision. This website is not an offer to sell any bonds.

Step 2 - Open a brokerage account

You must have an account with one of the brokerage firms participating in the bond sale, or with another firm that can place an order through a brokerage firm participating in the bond sale. Please check to determine if your broker can place an order through the participating brokers. (If you have a brokerage account, go to Step 3.) If you do not have an account, you may open one and purchase bonds during the Retail Sale Order Period. A list of brokers participating in the sale can be found on the left side of this page.

Investors are encouraged to begin the New Account process well in advance of the sale date. Depending on the brokerage firm, internal new account procedures may take some time to process.

Step 3 - Place your order

Contact the broker with whom you have an account, either online or by phone, to get more information about how to buy bonds during the Retail Sales period. Discuss with the broker the number of bonds, the maturity date and the price at which you are willing to purchase the bonds, as well as any questions you may have from examining the Preliminary Official Statement (POS).

What are municipal bonds?

Municipal bonds ("muni bonds") are bonds issued by a local or state government that are used to raise funds for capital improvements in infrastructure.  For example, a city or state may issue a bond to finance street, sewer or public building projects.  Municipal bonds are exempt from federal income taxes and sometimes from state and local taxes as well.

What is the role of credit rating agencies?

Credit rating agencies assign credit ratings based on their analysis of an issuer's ability to make interest payments and repay principal in a timely manner.

What is a Public Authority?

Public authorities are corporate instruments of the State created by the Legislature to further public interests. Public authorities have various levels of autonomy from the State based on the powers, as well as the constraints, built into their legislative mandate. Some public authorities are completely self-supporting and operate entirely outside the budget process, while others rely on State appropriations to fund operations. In addition, most authorities are authorized to issue bonds—without voter approval—to develop and maintain infrastructure, such as roads and schools, or to fund projects for third parties, including hospitals and nursing homes. The debt service for these bonds is usually supported by revenues of the project, such as tolls that are levied by the authority, fees paid by the third party or appropriated payments from the State to repay outstanding debt. The State has also assigned specific revenue streams to an authority as a way for the authority to pay debt service.

What does it mean when a bond or note is tax-exempt?

BPCA tax exempt bonds are or may be "triple tax exempt - exempt from Federal, New York State and New York City income taxes.

What are the key features of State municipal securities?
  • Creditworthiness - Some but not all municipal bonds have been rated by various rating agencies. A standard credit rating is supposed to be an independent assessment of the creditworthiness of the bonds. Since the global economic turmoil of 2008, the major credit rating agencies have been the focus of government scrutiny as to the objectivity of their ratings. That said, a credit rating is suppose to measure the probability of timely repayment of principal and interest of a bond or note. Higher credit ratings indicate the rating agency's view that there is a greater probability the investment will be repaid.
  • Interest Rate - The State pays interest to investors in exchange for the use of the loaned money. The interest rate is a percentage of the principal (the amount borrowed), accruing over a specified period. Interest on bonds or notes with fixed interest rates typically is compounded and paid semiannually. Interest on bonds or notes with variable interest rates accrues at a rate which changes periodically based on specific criteria.
  • Price - The price is the amount investors are willing to pay based on certain variables, including current market yields, supply and demand, credit quality, maturity and tax status. Keep in mind that price and yields move in opposite directions. When market yields increase, the value of a bond or note decreases, and vice versa.
  • Yield - The yield generally refers to the return an investor earns on the bond or note. The yield is calculated in two ways: based on the market price and interest rate; or by taking into account a number of factors, including interest rate, market price, maturity date and the time between interest payments. Investors should consult their brokers or other financial advisors to learn more about yield.
  • Maturity - Maturity is the date when the principal on the bond or note is scheduled to be repaid to the investor. The State generally sells bonds that have maturities between 1 and 30 years. In general, the further out the maturity date, the higher the investor's yield.
  • Redemption Provisions - Some bonds or notes contain provisions that allow the State to redeem, or "call," all or a portion of the bonds or notes, at specific prices, prior to their maturity dates. Bonds frequently are called when interest rates are lower than when the State sold the bonds. Bonds or notes with redemption provisions usually offer investors higher yields to compensate for the risk that the bonds might be called early. When the State calls a bond or note, it pays the holder the principal amount and any interest earned since the last interest payment. However, the holder does not receive the interest that would have been earned if the bond had been allowed to reach its maturity date. Holders of callable bonds or notes are notified of impending calls.
What are Build America Bonds?

Build America Bonds are taxable municipal bonds that carry special tax credits and federal subsidies for either the bond issuer or the bondholder. Build America Bonds were created under Section 1531 of Title I of Division B of the American Recovery and Reinvestment Act that was signed into law on February 17, 2009. The program expired December 31, 2010.

BABs were introduced to encourage investment in the local sector. BABs, like municipal bonds, are debt securities issued by a state, municipality, or county to finance capital expenditures. The interest rate on these bonds were subsidized by the federal government, making the cost of borrowing for infrastructure projects cheaper for state and local governments looking to borrow funds to finance new projects. In general, there are two distinct types of BABs: tax credit BABs and direct payment BABs.

Tax credit BABs offered bondholders and lenders a 35% federal subsidy of the interest paid through refundable tax credits, reducing the bondholder’s tax liability. If the bondholder's tax liability was insufficient to use the entire credit, it could be carried forward to future years.

The direct payment BABs offered a similar subsidy that was paid to the bond issuer. The U.S. Treasury made a direct payment to Build America Bond issuers in the form of a 35% subsidy of the interest they owed to investors. Since the effective cost of borrowing was reduced for issuers, they were able to offer the bonds to investors at competitive rates in the markets.  In addition, investors were more likely to opt for a bond issued by a government body since they will be less exposed to default risk prevalent in holding corporate bonds.

The difference between Build America Bonds and traditional municipal bonds is that income generated from the latter is exempt from federal and some state taxes while with BABs, the interest income was subject to tax at the federal level.